ITAT: Interest Subsidy Received under Technology Upgradation Fund Scheme is Not Chargeable to Tax

ITAT: Interest Subsidy Received under Technology Upgradation Fund Scheme is Not Chargeable to Tax

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore, not chargeable to tax.

The facts of the case were that the assessee- M/s Grasim Industries Ltd. is a company engaged in diverse the business such as garments, insulators, fertilizers, viz cost element young, financial services et cetera at a different units located across the country.

It filed its return of income on 29/9/2009 declaring a total income of Rs. 2,025,938,044/– as per name of provisions of the income tax act 1961 (the act) and book profit of Rs. 1,623,088,137/– under section 115JB of the act. This was revised on 30 March 2011 at a total income of Rs. 1,974,992,774/– as per normal computation of total income and book profit was computed at Rs. 1,623,088,137. The return of income was picked up for scrutiny. The learned assessing officer passed an assessment order under Section 143 (3) of the Income Tax Act, 1961 determining total income of the assessee at Rs. 2,286,072,210 as per the normal provisions of the act and book profit remains the same.

The main issue in the assessment was whether the subsidy received by the assessee for technology upgradation fund amounting to Rs. 83,426,992/– is capital receipt not chargeable to tax or revenue receipt chargeable to tax.

The division-member bench of Kuldip Singh (Judicial Member) and Prashant Maharishi (Accountant Member) noted that the assessee had claimed the subsidy as capital receipt, whereas, the Department treated the subsidy as Revenue in nature.

However, the bench referred assessee’s own case dated 24 February, 2020, whereby the Co-ordinate bench, by placing reliance on Pr. Commissioner of Income Tax, Ajmer v. Nitin Spinners Limited had held that the subsidy received under the technology upgradation fund scheme was a capital receipt.

The ITAT observed, “Therefore in view of the above decision of the coordinate bench the issue is squarely covered in favor of the assessee wherein it has been held that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore not chargeable to tax.”

In view of the above, the ITAT appeal raised by the AO was dismissed.